MFS Takes Steps to Attract Chilean Assets

MFS of Boston is the latest fund adviser to lay the groundwork to secure a portion of the almost $34 billion Chilean pension fund market.

In an August 1 prospectus amendment filed with the SEC, MFS said it will waive the usual sales charges on four of its U.S.-based funds for assets from Chilean retirement plans.

The MFS Emerging Growth Fund, MFS Research Fund, MFS Capital Opportunities Fund, and MFS Money Market Fund became available to Chilean investors without the sales charges as of the amendment filing. Chilean retirement dollars will be funneled through two brokers in the Washington, D.C. office of Morgan Stanley Dean Witter who work with Chilean pension plan administrators, according to a source who declined to be named.

Other countries privatizing their social security systems have looked to the dozen odd administrators of the Chilean pension fund system, collectively known in Chile as Administradores de Fondos de Pensiones (AFPs), as a model for their own systems. The Chilean system of AFPs is overseen but not run by the Chilean government.

Although the Chilean pension fund assets will be invested at net asset value, MFS Fund Distributors, the fund distribution arm of MFS, will pay Morgan Stanley a commission of 1.00 percent on all assets channeled to it, according to the prospectus amendment.

But MFS does not want to attract too many fast-moving assets in the Chilean pension system. The arrangement calls for Morgan Stanley to reimburse commissions on a pro-rata basis for shares which are redeemed within a three-year period. An MFS spokesperson declined to elaborate, saying that MFS does not comment on business brought in by brokers.

MFS currently manages over $113 billion in assets.

In recent years, the success of the Chilean pension system has attracted considerable attention. A number of other countries, including the U.S., have considered adopting a similarly-structured self-directed retirement system to at least partially replace Social Security and other comparable systems. Such pension reforms could also present enormous opportunities for mutual fund advisers.

In 1981, Chile replaced its government run pension system with a privately-administered national system of individual pension savings plans. Nine out of 10 workers are in the personal savings pension system, according to Chilean government statistics. Moreover, Chile has a 27 percent savings rate, according to the government.